My first sales manager would constantly remind me, "The old is forever new." Of course he was talking about the same old sales pitch being new to each new prospect. My current use refers to what we now call software as a service, or SaaS.
The concept of remotely accessing a single set of programs stored on a central server has its roots in what was once called client/server technology. But even client/server systems had their roots in mainframe systems with remote terminals. To be sure, there are significant differences in each generation, but the advantages and even the business models share the same basics
The advent and eventual growth of the PC, the LAN, and the network server reduced the cost of computer systems, and the ability for even the smallest companies to host their own business class applications. EDI systems jumped onboard the enterprise server trend, installing applications inside the corporate firewall, using digital connections to trading partners. Today, companies using EDI to enable their businesses find they can t do without the speed and efficiency their EDI systems deliver, but also face mounting costs because of the growing demand for connections with their trading partners who are located all across the globe.
Driving Functionality
In addition, these companies are adapting to the growing trends pushing functions back further from the customer by asking their suppliers to perform some of the tasks the receiving company has done in the past. The complexities of splitting single shipments into multiple deliveries, applying different labels to the different packages, and even repackaging bulk shipments into smaller packages drives the need to get information and instructions to the right place at the right time.
Moving the right data to multiple locations can certainly be accomplished within the EDI model. But the availability of a variety of technologies has given us a chance to look beyond the traditional model of locally installed applications with discrete connections to each trading partner, toward a more efficient design.
The trend propelling the popularity of SaaS is based on several factors. As Jeffrey Kaplan, Managing Director of THINKStrategies (www.thinkstrategies.com) in Wellesley, Massachusetts puts it, "There are two major reasons that SaaS has become a desirable option for companies of all sizes.
+ Traditional software users have been enormously dissatisfied with the results of their deployments. They have seldom achieved the objectives they hoped for. Up to half of these major deployments either failed, ended up costing more, or gave less functionality than they had hoped for.
+ Software installations are cumbersome, requiring ongoing support, updates, and technical intervention." Companies have realized that while their business relies on the information in their computer systems, they are not in the business of building and managing the computing systems that enable their businesses.
Another not-so-subtle shift has been taking place in the consumer world. As Kaplan puts it, "Consumers have seen the marketplace deliver tremendous changes recently. Companies like Amazon.com iTunes, eBay, Google, and UTube have demonstrated that it s possible to make highly sophisticated applications responsive and simple to use. Of course these same consumers live in the corporate world and wonder why, if these kinds of advances can be made for consumer applications, are they not being delivered as corporate applications."
The Business of Software
Of course, consumer applications generally operate on a different business model than do enterprise applications. Most derive their funding either from subscriptions or from advertising revenues, while corporate applications are typically purchased. But reversing that revenue model can produce benefits for both the corporate customer and for the software vendor.
Kaplan explains, "There is a macro trend showing up now. IT assets were, in the past, considered to be competitive assets. But now most are commodity products. As commodities, companies are looking for their least expensive options, and this has lead them to look at outsourcing vendors." Outsourced applications are finding their own lowest cost options to be in delivering SaaS based applications.
Companies delivering SaaS applications find the revenue model an answer to their old dilemma of a continuing source of revenue. Historically, software companies that sold their software charged annual maintenance fees. But in order to boost their income, companies needed to identify and then offer additional features and functions for which they could charge their customers. After a few years, customers realized they had more features than they required and the upgrade cycle lost its value proposition for them.
The SaaS model provides continuing revenue for the provider, consistent expenditure, reduced administration, and access to additional features for the user organization.
Bringing the Outside Inside
Kaplan points to another growing trend, "The multivendor API ecosystem is evolving. Companies that provide SaaS applications encourage both their customers and other SaaS providers to coordinate their efforts." Companies like Salesforce.com provide application programming interfaces (API) that allow their partners to connect their programs directly to one another. Salesforce.com s AppExchange lists more than 400 integrated functions that can be used to expand the functionality of their system.
According to Kaplan, "Integration is going beyond simple connectivity. Partners are providing common look and feel to their user interfaces, so the transition from one application to another is transparent to the user." This reduces the learning curve for users and makes the integration transparent.
Even Better Results
The change from locally installed applications with remote connections to network based systems goes beyond just reducing expenses improving reliability. Kaplan points out, "The added functionality that SaaS systems are able to provide go far beyond traditional applications." Precisely because these systems are location independent and available in real time from anywhere on the globe, they open a wide range of possibilities for sharing time-critical information. "This has allowed the supply-side to evolve a new generation of business-oriented, user friendly applications that are addressing an assortment of corporate requirements. In the case of EDI, specifically the globalization of business. The use of Internet connectivity has proven a great way to address the issues we face in doing business around the globe.
My first sales manager would constantly remind me, "The old is forever new." Of course he was talking about the same old sales pitch being new to each new prospect. My current use refers to what we now call software as a service, or SaaS.
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20.01.07
Technologies
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